Bitcoin booms and DeFi declines

In what seems to be like a Zero-sum game, since September, Bitcoin has increased drastically in value while DeFi Tokens value has plummeted.

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A Twitter user “Bitdealer”, who is actually the co-founder of crypto data aggregator Markets Science has posted a chart that compares BTC and DeFi tokens which shows a negative correlation between BTC and 11 of the top DeFi tokens in the last 45 days up to today which is November 1. In this chart, AAVE displays a neutral correlation, and a confluence smaller than 0.1 was observed in UNI.

There is also other interesting information on this chart. Although it is Ethereum that powers a large part of DeFi ecosystem, 7 of the 13 DeFi tokens have a negative correlation with ETH.

It should be mentioned that while most DeFi tokens are losing value BTC has jumped in price last week and analysts have found that there’s a longer negative correlation between BTC and the decentralized finance tokens.

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Source: Figure 1; 45-day correlation between price performance of BTC and 13 top DeFi tokens: Bitdealer Source; cointelegraph

The sector, nonetheless, reached its speculative plateau by the end of August when DeFi Composite Index which belongs to Binance plummeted experiencing a major fall from $1100 at the start of September to less than $400 and crashing 64% at the time of writing this article which is November 2.

DPI or DeFi Pulse Index has also plunged by half of its worth since its launch at $130 around the middle of September. The last recorded trading price for the DPI token was just $61.55.

On the other hand, the most popular cryptocurrency and the one with the largest trading volume, Bitcoin, has skyrocketed and increased its value by a third in the past month right after PayPal announcing its entrance into the crypto world.

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